In consequence of this measure not only the demand for moreAmerican stocks and State paper fell off in England, but also suchpaper as was already in circulation now forced itself more on themarket.The United States were thereby not merely deprived of themeans of covering their current deficit by the further sale ofpaper, but payment of the whole debt they had contracted in thecourse of many years with England by means of their sales of stocksand State paper became liable to be demanded in money.It nowappeared that the cash circulation in America really belonged tothe English.It appeared yet further that the English could disposeof that ready money on whose possession the whole bank and papersystem of the United States was based, according to their owninclination.If, however, they disposed of it, the American bankand paper system would tumble down like a house built of cards, andwith it the foundation would fall whereon rested the prices oflanded property, consequently the economical means of existence ofa great number of private persons.
The American banks tried to avoid their fall by suspendingspecie payments, and indeed this was the only means of at leastmodifying it; on the one hand they tried by this means to gain timeso as to decrease the debt of the United States through the yieldof the new cotton crops and to pay it off by degrees in thismanner; on the other hand they hoped by means of the reduction ofcredit occasioned by the suspension to lessen the imports ofEnglish manufactured goods and to equalise them in future withtheir own country's exports.
How far the exportation of cotton can afford the means ofbalancing the importation of manufactured goods is, however, verydoubtful.For more than twenty years the production of this articlehas constantly outstripped the consumption, so that with theincreased production the prices have fallen more and more.Hence ithappens that, on the one hand, the cotton manufacturers are exposedto severe competition with linen manufactures, perfected as theseare by greatly improved machinery; while the cotton planters, onthe other hand, are exposed to it from the planters of Texas,Egypt, Brazil, and the East Indies.
It must, in any case, be borne in mind that the exports ofcotton of North America benefit those States to the least extentwhich consume most of the English manufactured goods.
In these States, namely, those which derive from thecultivation of corn and from cattle-breeding the chief means ofprocuring manufactured goods, a crisis of another kind nowmanifests itself.In consequence of the large importation ofEnglish manufactured goods the American manufactures weredepressed.All increase in population and capital was therebyforced to the new settlements in the west.Every new settlementincreases at the commencement the demand for agricultural products,but yields after the lapse of a few years considerable surplus ofthem.This has already taken place in those settlements.TheWestern States will therefore pour, in the course of the next fewyears, into the Eastern States considerable surplus produce, by thenewly constructed canals and railways; while in the Eastern States,in consequence of their manufactories being depressed by foreigncompetition, the number of consumers has decreased and mustcontinually decrease.From this, depreciation in the value ofproduce and of land must necessarily result, and if the Union doesnot soon prepare to stop up the sources from which theabove-described money crises emanate, a general bankruptcy of theagriculturists in the corn-producing States is unavoidable.
The commercial conditions between England and North Americawhich we have above explained, therefore teach:
(1) That a nation which is far behind the English in capitaland manufacturing power cannot permit the English to obtain apredominating competition on its manufacturing market withoutbecoming permanently indebted to them; without being rendereddependent on their money institutions, and drawn into the whirlpoolof their agricultural, industrial, and commercial crises.
(2) That the English national bank is able by its operations todepress the prices of English manufactured goods in the Americanmarkets which are placed under its influence -- to the advantage ofthe English and to the disadvantage of the American manufactories.
(3) That the English national bank could effect by itsoperations the consumption by the North Americans, for a series ofyears, of a much larger value of imported goods than they would beable to repay by their exportation of products, and that theAmericans had to cover their deficit during several years by theexportation of stocks and State paper.
(4) That under such circumstances the Americans carried ontheir internal interchange and their bank and paper-money systemwith ready money, which the English bank was able to draw to itselffor the most part by its own operations whenever it felt inclinedso to do.
(5) That the fluctuations in the money market under allcircumstances act on the economy of the nations in a highlydisadvantageous manner, especially in countries where an extensivebank and paper-money system is based on the possession of certainquantities of the precious metals.
(6) That the fluctuations in the money market and the criseswhich result therefrom can only be prevented, and that a solidbanking system can only be founded and maintained, if the importsof the country are placed on a footing of equality to the exports.
